Sept. 7 (Bloomberg) -- U.S. regulators said they will help develop plans to restore capital at banks with ``significant'' holdings in Fannie Mae and Freddie Mac after the government seized control of the two mortgage-finance companies.

The Federal Reserve and three other banking agencies ``are prepared to work'' with smaller banks whose stakes in Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac represent a large share of their capital, the regulators said today in a joint news release.

The Treasury Department and the Federal Housing Finance Agency today placed the companies under a so-called conservatorship, replacing their chief executives and eliminating dividends. Common stockholders of the government- sponsored enterprises, weakened by a surge in mortgage defaults, will be last in line for any claims, Treasury Secretary Henry Paulson said at a Washington news conference. Preferred shareholders will be second in absorbing losses, he said.

The takeover is ``unambiguously bad'' for preferred shareholders who, along with holders of common stock, ``will in all likelihood be wiped out,'' Gimme Credit LLC analyst Kathleen Shanley said today in a statement. ``The government opted not to sweeten the pill for bank holders of preferred stock,'' in a move ``likely to set a precedent for any future rescue transactions,'' Shanley said.

`Outsized' Stakes

Regulators may be concerned the market will think smaller banks' capital will be completely depleted, said Ira Jersey, a Credit Suisse Holdings USA Inc. interest-rate strategist. He said his said research showed only ``five or six banks'' may have ``outsized'' stakes in the Fannie Mae and Freddie Mac compared with their capital.

Small lenders have been the hardest hit as banks are being closed by federal regulators at the fastest pace in 14 years amid the worst housing slump since the Great Depression. This year's total reached 11 on Sept. 5 when Silver State Bank of Henderson, Nevada, was shuttered.

``Across the industry, banks do not have significant exposure to GSE equity securities,'' Federal Deposit Insurance Corp. Chairman Sheila Bair said today in a statement. ``Any negative impact will be narrowly focused only on a few smaller institutions.''

Paulson urged banks to contact their primary federal regulator if they believe losses on holdings of common or preferred shares in Fannie Mae or Freddie Mac will cause them to fall below the government's benchmark for ``well-capitalized'' institutions.

Besides the Fed and FDIC, the Office of the Comptroller of the Currency and the Office of Thrift Supervision also signed onto today's release.

The OTS, which regulates savings and loans, expects the seizure of Fannie and Freddie to have ``a negligible impact'' since less than 1 percent of the institutions it oversees have significant concentrations of GSE stock, OTS spokesman Bill Ruberry said in an e-mail statement.

To contact the reporter on this story: Alison Vekshin in Washington at avekshin@bloomberg.net; Linda Shen in New York at lshen21@bloomberg.net

Last Updated: September 7, 2008 16:21 EDT